Reciprocal Method

Reciprocal Method This method is different from direct method and..

Reciprocal Method

Reciprocal Method

This method is different from direct method and step down method. The reciprocal method allocates support department cost to operating departments by completely recognizing the shared services provided by all the support departments of the organization. We can explain this concept by taking an example of the organization set up, that is, the plant maintenance department successfully maintains all the computer equipment in a particular place called information system department and in the same way the information system department provides support to the plant maintenance by keeping all the data base support. The reciprocal method maintains a complete harmony among all the other departments by incorporating interdepartmental relationships in to the support department cost allocations.

One way to understand the way of reciprocal method is to take this method as an extension of the step down method. As is the case in the procedure to step down, and the first is the allocation of maintenance costs for the plant to all other departments, including the support of the management information systems. In the step down method these costs are allocated directly to departments operating alone. But the reciprocal method recognizes that part of the costs of management information systems arises because of the support it provides to plant maintenance. When there are departments to support more than two decades of mutual relations with, the requirement arises for programs such as Excel or requirement to calculate the full cost of the same in all the support section. Since finding the inverse matrix calculations involved, is also a way of reciprocity, therefore the reciprocal method is sometimes referred to as the matrix method.

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